Salesforce.com: Wall Street Darling or Dog?

Salesforce.com (NASDAQ:CRM) is turning heads, thanks to the stock’s meteoric rise of more than 400 percent since 2009. The stock is surrounded by controversy — the bulls tout Salesforce.com’s high revenue growth and industry-leading IT services, while bears fire back, arguing that the company will never be profitable. Let’s use our CHEAT SHEET investing framework to cut through the noise, and decide whether Salesforce.com is an OUTPERFORM, WAIT AND SEE, or STAY AWAY.

C = Catalysts for the Stock’s Growth

Gartner (NASDAQ:IT) — an advisory firm that reviews IT services — recently evaluated Salesforce.com’s Sales Cloud and Service Cloud as industry leaders. To anyone who works closely with these types of systems, Salesforce.com’s high ratings should come as no surprise. In fact, the company has achieved Gartner’s coveted “leader” rating in each of the last seven years. Its dominant position in the rapidly growing cloud computing industry has led to revenue growth of more than 30 percent this year.

However, the market had trouble digesting Salesforce.com’s recent acquisition of digital marketing company, ExactTarget, for $2.5 billion. Salesforce.com acquired ExactTarget for a more than 50 percent premium. CEO Marc Benioff implied that through the acquisition, the company is working to establish a dominant presence in the quickly developing world of digital marketing. With an impressive client roster, and strong cloud marketing systems already in place, ExactTarget seems like a valuable acquisition. However, considering that ExactTarget has not been profitable since 2008, $2.5 billion seems like a lot to pay for a company that generated just $300 million in sales last year.